Fiscal Q1 2016 Financial ResultsRevenue for the first quarter of fiscal 2016 increased 12% to $15.7 million from $14.0 million in the same year-ago quarter. The improvement was primarily due to increased deployments by the Company’s incumbent local exchange carrier (ILEC) and competitive local exchange carrier (CLEC) customers. The revenue increase was partially offset by temporary project delays impacting customers outside the U.S.

Gross profit increased 16% to $6.7 million (42.6% of revenue) from $5.7 million (41.1% of revenue) in the first fiscal quarter of 2015.

Operating expenses were $4.7 million, an increase of 14% compared to $4.1 million in the same year-ago quarter.

Pre-tax income increased 23% to $2.0 million from $1.6 million in the same year-ago quarter.

Net income increased 29% to $1.4 million or $0.10 per diluted share from $1.1 million or $0.08 per diluted share in the same year-ago quarter.

During the quarter ended December 31, 2015, cash, cash equivalents and investments increased 6% to $36.2 million from $34.3 million at the end of the prior quarter. The Company had no debt at quarter end.

Order backlog (defined as purchase orders received but not yet fulfilled) at December 31, 2015 decreased 5% to $3.4 million from $3.5 million at September 30, 2015, and increased 37% from $2.5 million compared to December 31, 2014.

Management Commentary“Our strong financial performance was evident in our Q1 results, which demonstrated another quarter of growth and profitability,” said Clearfield CEO, Cheri Beranek. “Revenue, gross profit and net income saw solid growth on a year-over-year basis, as we continued to penetrate the ILEC market and make steady progress on our key initiatives for fiscal 2016.

“To further these initiatives, we are judiciously increasing our capital expenditures to invest in our IT infrastructure and enterprise resource planning systems. We are also making investments to obtain necessary certifications that allow us the ‘right to hunt’ in the Tier 1 space. Additionally, we continue to strengthen our sales and marketing teams, in both executive and field positions, in order to broaden our customer outreach and increase our visibility in the marketplace, including in Tier 1, 2 and 3 ILEC communities, and with wireless service providers, cable operators and competitive carriers (CLECs). The strength of our competitive product offerings, which can reduce the total cost of ownership for a service provider by as much as 50%, gives us confidence in the future success of these efforts.

“The effect of the government broadband subsidy program, Connect America Fund Phase II, is also slowly starting to take shape throughout the industry. It has created an opportunity for Clearfield to capitalize on a major, industry-wide wave of fiber deployments, especially as service providers strive to remain technologically relevant. While the actual timing of fiber roll-outs could be delayed by factors outside of our control, we are positioning the Company for an anticipated major roll-out during the second half of our fiscal year.

“Given our fiscal Q1 results and progress on key initiatives, Clearfield remains on track for at least 10% revenue growth in fiscal 2016, with revenue growth accelerating in fiscal 2017 and beyond, and operating income growing in step with revenue.”

FieldReportClearfield issued its FieldReport for fiscal Q1 2016, which is available in the investor relations section of the Company’s website or by clicking here. Comprised of presentation slides with audio and video, the report provides additional insight into Clearfield’s financial and operational performance.

About Clearfield, Inc. Clearfield, Inc. (NASDAQ:CLFD) designs, manufactures and distributes fiber optic management products for the communications networks of leading ILECS, CLECs, MSO/cable TV companies and mobile broadband providers. The Company helps service providers solve the Fiber Puzzle, which is how to reduce the high costs associated with deploying, managing, protecting and scaling a fiber optic network to deliver the mobile, residential and business services customers want. Based on the patented Clearview™ Cassette, Clearfield’s unique single-architected, modular fiber management platform is designed to lower the cost of broadband deployment and maintenance by consolidating, protecting and distributing incoming and outgoing fiber circuits, and enabling its customers to scale their operations as their subscriber revenues increase. Headquartered in Minneapolis, MN, Clearfield deploys more than a million fiber ports each year. For more information, visit www.seeclearfield.com.

Cautionary Statement Regarding Forward-Looking InformationForward-looking statements contained herein and in the FieldReport are made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “outlook,” or “continue” or comparable terminology are intended to identify forward-looking statements. Such forward looking statements include, for example, statements about the Company’s future revenue and operating performance, growth of the FTTH market, effectiveness of the Company’s sales and marketing strategies and organization, utilization of manufacturing capacity, and the development and marketing of products. These statements are based upon the Company's current expectations and judgments about future developments in the Company's business. Certain important factors could have a material impact on the Company's performance, including, without limitation: our results of operations could be adversely affected now that the stimulus funds of the American Recovery and Reinvestment Act are fully allocated and projections are nearing completion; National Broadband Plan’s transitioning from the USF to the CAF program may cause our customers and prospective customers to delay or reduce purchases; a significant percentage of our sales in the last three fiscal years have been made to a small number of customers, and the loss of these major customers would adversely affect us; intense competition in our industry may result in price reductions, lower gross profits and loss of market share; our results of operations could be adversely affected by economic conditions and the effects of these conditions on our customers’ businesses; our operating results may fluctuate significantly from quarter to quarter, which may make budgeting for expenses difficult and may negatively affect the market price of our common stock; to compete effectively, we must continually improve existing products and introduce new products that achieve market acceptance; we may face circumstances in the future that will result in impairment charges, including, but not limited to, significant goodwill impairment charges; we rely on single-source suppliers, which could cause delays, increases in costs or prevent us from completing customer orders, all of which could materially harm our business; we face risks associated with expanding our sales outside of the United States; our success depends upon adequate protection of our patent and intellectual property rights; further consolidation among our customers may result in the loss of some customers and may reduce sales during the pendency of business combinations and related integration activities; we are dependent on key personnel; product defects or the failure of our products to meet specifications could cause us to lose customers and sales or to incur unexpected expenses; and other factors set forth in Part I, Item IA. Risk Factors of Clearfield's Annual Report on Form 10-K for the year ended September 30, 2015 as well as other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update these statements to reflect actual events.

CLEARFIELD, INC.

CONDENSED STATEMENTS OF OPERATIONS

UNAUDITED

Three Months Ended

December 31

2015

2014

Revenues

$

15,689,715

$

13,986,620

Cost of sales

9,012,919

8,244,106

Gross profit

6,676,796

5,742,514

Operating expenses

Selling, general and administrative

4,697,015

4,125,997

Income from operations

1,979,781

1,616,517

Interest income

33,539

25,856

Income before income taxes

2,013,320

1,642,373

Income tax expense

630,000

573,000

Net income

$

1,383,320

$

1,069,373

Net income per share:

Basic

$

0.10

$

0.08

Diluted

$

0.10

$

0.08

Weighted average shares outstanding:

Basic

13,288,679

13,222,180

Diluted

13,575,162

13,581,434

CLEARFIELD, INC.

CONDENSED BALANCED SHEETS

(Unaudited)December 31, 2015

(Audited)September 30, 2015

Assets

Current Assets

Cash and cash equivalents

$

20,699,033

$

18,071,210

Short-term investments

8,746,000

7,925,000

Accounts receivable, net

5,019,660

6,010,900

Inventories

6,943,519

7,182,854

Other current assets

556,127

1,563,665

Total current assets

41,964,339

40,753,629

Property, plant and equipment, net

5,551,700

5,689,673

Other Assets

Long-term investments

6,767,000

8,290,000

Goodwill

2,570,511

2,570,511

Other

345,481

323,804

Total other assets

9,682,992

11,184,315

Total Assets

$

57,199,031

$

57,627,617

Liabilities and Shareholders’ Equity

Current Liabilities

Accounts payable

$

2,183,253

$

2,357,791

Accrued compensation

1,394,342

2,598,661

Accrued expenses

103,387

80,803

Total current liabilities

3,680,982

5,037,255

Other Liabilities

Deferred taxes – long-term

152,988

1,082,887

Deferred rent

233,474

228,345

Total other liabilities

386,462

1,311,232

Total Liabilities

4,067,444

6,348,487

Commitment and contingencies

Shareholders’ Equity

Common stock

137,062

137,057

Additional paid-in capital

56,356,982

55,887,850

Accumulated deficit

(3,362,457

)

(4,745,777

)

Total Shareholders’ Equity

53,131,587

51,279,130

Total Liabilities and Shareholders’ Equity

$

57,199,031

$

57,627,617

CLEARFIELD, INC.

CONDENSED STATEMENT OF CASH FLOWS

UNAUDITED

Three MonthsEndedDecember 31,

Three MonthsEndedDecember 31,

2015

2014

Cash flows from operating activities:

Net income

$

1,383,320

$

1,069,373

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

348,749

229,900

Deferred income taxes

217,000

529,000

Loss on disposal of assets

1,390

-

Stock-based compensation expense

226,767

283,627

Tax benefit from stock-based awards

(348,000

)

-

Changes in operating assets and liabilities:

Accounts receivable, net

991,240

372,879

Inventories

239,335

31,187

Other current assets

(146,494

)

(222,800

)

Accounts payable and accrued expenses

(1,003,144

)

(1,219,481

)

Net cash provided by operating activities

1,910,163

1,073,685

Cash flows from investing activities:

Purchases of property, plant and equipment and intangible assets

(226,710

)

(1,764,875

)

Purchase of investments

(1,184,000

)

(1,638,000

)

Sale of investments

1,886,000

1,375,000

Net cash provided by (used in) investing activities

475,290

(2,027,875

)

Cash flows from financing activities:

Tax benefit from stock-based awards

348,000

-

Repurchase of common stock

(257,242

)

(170,170

)

Proceeds from issuance of common stock under employee stock purchase plan